Friday, January 25, 2013

Hey boy get a sweater: Angus on NPR?

There is much more than just the salary cap (which restricts teams' overall payrolls) involved in the financial hosing of LeBron. It's the whole collective bargaining agreement (CBA). Even if a team chooses to spend over the cap and pay the steep "luxury tax", there are still provisions in the CBA that limit the maximum salary any player can receive, how fast that salary can rise over the course of the contract, and how long the contract can last.

All of those things work against the LeBrons and in favor of the "median" player. Whatever sized pie is available, these other CBA provisions limit how much of it can go to the superstars, thus leaving more of it for the rank and file.

10 comments:

Gerardo
said...

How much of LeBronze total compensation is from salary?

Can you make an argument that the NBA needs to overpay the median player so that player doesn't go play in an Italian league for more money, driving down the quality of the median NBA player? Sort of an efficiency wage argument to keep two or three superstars from being surrounded by a sea of mediocrity?

Certainly the NBA, MLB already restrict team entry, for obvious reasons, though the argument against expansion usually has to do with the "talent" pool.

Does your analysis hold up in baseball? I.e., would the highest paid players be better off if there were a salary cap? Would it increase competition and fandom more enough to compensate for their salary loss?

Gerardo: it's about half. Euro leagues are in very rough shape with the crisis. The average US player doesn't thrive there.

Anon: AFAIK, there is a hard salary floor in the NBA, but if not, there should be.

Dave: I didn't say anywhere that the highest paid NBA players are better off because of the salary cap. That said, it's an interesting question. I know a decent amount about the economics of NBA and NFL but very little about MLB.

The way the author wrote the article and sometimes paraphrased you made it seem that you were saying that James is better off.

Here are the paragraphs I'm referring to: (In any case, it's no big deal; I probably misread what's being said, and then my mind jumped to a counterfactual of sorts, i.e., the salary-cap free MLB. Also, I've enjoyed your commentary and T. Cowen's on sports. It's much more enjoyable than the normal sports pundits.)

"James is profoundly underpaid because there is nothing resembling a free market for NBA players. And, weirdly, this is good for James..."

"And this, Grier says, is why Lebron James has a reason to support the system. Playing in a more competitive league helps him make more money in other ways....

"To earn those tens of millions of endorsement dollars, James needs passionate fans of professional basketball. For that to happen, he needs good teams to play against, even if it's costing him over $20 million a year."

Dave: that was their spin and it's certainly true that a strong league helps outside earnings. I'd put it like, LeBron is getting a decent return on his "investment" in the health of the league. Whether the situation is optimal for him or whether it even maximizes league wide profits is an open question. I don't think it's very far away, but I have no proof.

Thanks for your kind words about me and Tyler's stuff. We hope to do more in the coming year.

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